As organizations seek to drive increased technology cost transparency, IT departments are making good strides to implement the tools and processes to communicate the value of IT. While the approach is right, a common oversight in the rush to implement such tools is the failure to strategically assess and account for flawed reporting mechanisms, resource recognition, and budgeting processes.
Without a holistic approach to understanding technology assets, their consumption and performance management, technology cost transparency efforts will be flawed and unable to provide clear accountability at both the business unit and IT organizational levels.
Many firms focus on key metrics measurement programs and business intelligence communications without having adequate technology consumption tracking mechanisms or a full view into the scope of technology utilization for the business. This is often the result of a limited strategic role of IT or decentralized business practices. As a result, earnest attempts at transparency efforts can often result in “false transparency” – key metric data and analysis that monitors only a part of the full technology portfolio, which leads to misrepresentation of how the business and technology assets are aligned.
This false transparency is even more dangerous than a lack of overall IT-spend and utilization data. That’s because it can lead to larger, more strategic decisions that management believes to be driven by sound data but that could be, ultimately, completely inconclusive and inaccurate.
Technology consumption transparency is at the heart of the cost transparency movement. By providing comprehensive insight into both the actual technology volumes consumed by each part of the business and the associated costs and resources based on accurate consumption, clear accountability can be established enabling IT and the entire business make better decisions about its use of technology.
What other traits contribute to false transparency?
Failure to Attribute Consumption to Specific Lines of Business – Often, organizations will have a centralized infrastructure and LOB-specific application functions are the only costs directly attributed to the business.
Inadequate Allocation Methods – Many organizations lack the necessary tools and processes to track their technology resources back to the point of consumption. As a result, expenses may be attributed to parts of the business that in fact have much lower tech utilization.
Inadequate Product and Service Definition – IT organizations often think in terms of MIPs, servers, lines of code, GB of bandwidth, but to the business partners, these concepts often do not help them understand how technology will help improve business outcomes.
Associated Risks (Perception of) Mischarging – When chargeback mechanisms do not adequately reflect true consumption, overcharging is common for some business units while others might not be paying for tech resources that they are in fact consuming.
Pursuit of genuine cost transparency – with technology consumption transparency at the core of the effort – allows organizations to avoid nearly all of the pitfalls of false transparency and align business and technology and maintain effective IT financial governance. Build your cost transparency program on a strong foundation that considers:
- All technology products and services
- Accurate timely consumption data
- Complete technology performance utilization metrics
In return, you will be providing your entire business management team with the ability to forecast their technology needs more accurately, track and manage consumption more effectively, and consistently make better technology deployment decisions.
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